The Owner of your Company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.3%. Three options are available: Item Opt. A Opt. B Opt.C Price 50,000 100,000 150,000 O&M 5,000 6,000 7,000 Sales 20,000 30,000 40,000 Salvage 10,000 5,000 7,000 Life 5 10 15 Cost of Capital 5.30% He/she asks you: 1) Which option should be chosen? ( show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project horizon), which option should be chosen, and how would you choose it? ( show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000 The Owner of your Company wants to set up an additional production line which intends to operate for 15 years. He/she knows the Company's Cost of Capital is 5.3%. Three options are available: Item Opt. A Opt. B Opt.C Price 50,000 100,000 150,000 O&M 5,000 6,000 7,000 Sales 20,000 30,000 40,000 Salvage 10,000 5,000 7,000 Life 5 10 15 Cost of Capital 5.30% He/she asks you: 1) Which option should be chosen? ( show the calculations) 2) In the event he/she decides instead to operate the production line indefinitely (no limit on the project horizon), which option should be chosen, and how would you choose it? ( show the calculations) Make the following simplifying assumptions: a) Cost of Capital will remain unchanged throughout the project horizon b) Sales will remain constant throughout the project horizon c) O&M will remain constant throughout the project horizon d) Option B salvage value in the middle of its useful life is $20,000